We need family leave — but not at the expense of retirement benefits
By Jennifer Greenfield
On Thursday, Republican Sen. Marco Rubio of Florida introduced legislation that is an important move toward enacting a national paid family leave policy. Rep. Ann Wagner of Missouri is expected to introduce a similar bill in the House in September.
The United States lags significantly behind the rest of the world’s leave policies, holding dubious distinction as one of just a handful of countries without at least universal maternity leave. As the Rubio plan signals, the United States may have turned a corner recently with a growing bipartisan acknowledgment that the time for paid leave has come.
Unfortunately, while we can hail the Rubio plan as a significant step forward, it’s a plan that would undermine many of the benefits that make a national paid leave plan necessary in the first place.
The Economic Security For New Parents Act would make paid leave available only to parents of newborns or newly adopted children, would provide limited income replacement, and would require leave-takers to delay their Social Security benefits for retirement or reduce their retirement benefits — in essence, requiring workers to take an advance on their retirement in order to pay for time at home with their newborn.
This plan is motivated in part by mounting evidence about the importance of parents’ engagement with newborn infants during the infants’ first weeks and months of life. I participated in a robust discussion of this evidence last week at a Bipartisan Policy Center conversation, which was headlined by Ivanka Trump and former Sens. Chris Dodd and Rick Santorum. But as I said then, any proposal to tap into Social Security to pay for paid leave ignores important evidence about our country’s looming retirement crisis, which would only be exacerbated by this plan.
Americans are increasingly unprepared for their own retirement. There are several key reasons: decreasing access to pensions and workplace retirement plans; a cost of living that has grown more quickly than incomes; and rising life expectancies, which mean that our meager savings must stretch further.
When those savings are exhausted, most Americans have some Social Security benefits to fall back on — but for about one-quarter of current retirees, Social Security accounts for at least 90% of retirement income, and this situation will only worsen down the road.
Of course, lack of paid leave has also contributed to the problem by forcing many workers to leave the workforce or reduce hours when a new baby comes or a health crisis emerges. The loss of income causes a drop in Social Security and 401(k) contributions as well.
In this context, any plan that decreases Social Security benefits is short-sighted. Although the Rubio plan would require workers to delay their retirement in order to qualify for full benefits, millions of Americans reach retirement age unable or unwilling to wait to collect benefits. Many Americans already claim their retirement benefits before reaching their full retirement age, despite significant financial penalties for doing so.
Under the Rubio plan, millions more are likely to reduce their future retirement income, and as a result could end up dependent on safety net programs at the state and federal level in later life. The plan may appear penny-wise in the short term, but it sends an invoice to future generations that they are unlikely to be able to pay.
Importantly, the legislation would especially harm those who already rely disproportionately on Social Security as their primary income in retirement. People of color, women, and lower income workers are less likely to have access to and to participate in workplace retirement programs.
When they do have access, they still contribute less because of pervasive income and wealth disparities by race and gender, and as a result, these historically marginalized groups experience significant income disparities in retirement.
People of color and those in low-wage jobs are alsoless likely to have paid leave through their employers, and if they avail themselves of the meager income replacement available through the Rubio plan, they will be most likely to experience additional financial insecurity in retirement.
Humans are particularly prone to choosing short-term benefits over long-term gains. Asking workers early in their careers to reduce a benefit they will not need for several decades is bound to backfire. Not only does it place immediate, unanticipated pressures on an already stressed Social Security system, but it sets up millions of workers for less financial security in their later years — an outcome workers are unlikely to anticipate or plan for when making the decision to take parental leave.
Thus, an unfortunate consequence of the Rubio plan is that, instead of increasing retirement security by helping workers maintain consistent employment and income through childbirth, it would escalate the crisis by reducing earned retirement benefits. Rather than further stressing our retirement system, a paid leave plan that is supported with very modest payroll contributions would ensure that American families have access to paid leave when they need it without compromising their ability to retire on time.
An independent analysis by the Center on Law and Social Policy found that contributions of only 0.2% of income from employers and employees would fund a much more comprehensive paid family and medical leave plan.
I applaud Republican leadership, including Ms. Trump, Sen. Rubio, and Rep. Wagner, for advancing the conversation about paid leave. And I remain optimistic that a viable bipartisan solution is possible — one that helps workers to keep their jobs and pay the bills when a new baby arrives or when a health crisis emerges, but that also strengthens workers’ retirement preparation. Done well, paid leave is an investment in long-term financial security that will benefit us all.